# How can there be a glut of oil on the international markets atm?
**URL:** https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246
**Category:** Factual Questions
**Created:** [November 10, 2019, 5:34pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246 "2019-11-10T17:34:16Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@bardos](https://boards.straightdope.com/u/bardos)
#### Post date: [November 10, 2019, 5:34pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/1 "2019-11-10T17:34:16Z")
After the Yemeni attack on Saudi production which reportedly cut their output by 50%… Embargo on Iranian oil. Embargo on Venezuelan oil. Libyan problems… And yet the price of oil has dropped and remains stable.
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### Author:  [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)
#### Post date: [November 10, 2019, 6:32pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/2 "2019-11-10T18:32:04Z")
[This table](https://en.wikipedia.org/wiki/List_of_countries_by_oil_production) from Wikipedia explains the reason, in part. Oil is produced in many countries.
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### Author:  [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)
#### Post date: [November 10, 2019, 6:36pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/3 "2019-11-10T18:36:38Z")
The title of this article mostly says it all… [OPEC lowers forecast for oil demand growth, says its own market share is dwindling](https://www.cnbc.com/2019/11/05/opec-report-global-oil-demand-growth-forecast-cut-over-the-medium-and-long-term.html)
This quote in particular puts the point on it…
> [@](#):
>
> “Signs of stress have appeared in the global economy, and the outlook for global growth, at least in the short- and medium-term, has been revised down repeatedly over the past year,” OPEC said.
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### Author:  [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)
#### Post date: [November 10, 2019, 6:46pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/4 "2019-11-10T18:46:20Z")
[This article](https://www.nytimes.com/2019/11/03/business/energy-environment/oil-supply.html) from The New York Times (paywall warning) talks about new production that’s expected from Brazil, Canada, Guyana and Norway.
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### Author:  [@bardos](https://boards.straightdope.com/u/bardos)
#### Post date: [November 10, 2019, 6:59pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/5 "2019-11-10T18:59:40Z")
Interesting… My mind asks the question: What will/would happen if Saudi, Iranian, Venezuelan, Libyan oil comes back on-line?
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### Author:  [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)
#### Post date: [November 10, 2019, 7:10pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/6 "2019-11-10T19:10:55Z")
> [@bardos](#):
>
> Interesting… My mind asks the question: What will/would happen if Saudi, Iranian, Venezuelan, Libyan oil comes back on-line?
If the demand forecast doesn’t change, the price will go down. Unless producers cut production.
Producers don’t like to cut production because it’s hard to ramp production up and down, and they don’t want to risk losing customers permanently. But they do it if the factors seem to favor it.
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### Author:  [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)
#### Post date: [November 10, 2019, 8:36pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/7 "2019-11-10T20:36:32Z")
> [@bardos](#):
>
> After the Yemeni attack on Saudi production which reportedly cut their output by 50%… Embargo on Iranian oil. Embargo on Venezuelan oil. Libyan problems… And yet the price of oil has dropped and remains stable.
Does an embargo on Iran or Venezuela affect global prices? If Sweden or China buys oil from Iran and Venezuela, that means they don’t have to buy it from Mexico or Russia, and the US then buys the Mexican and Russian oil.
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### Author:  [@lingyi](https://boards.straightdope.com/u/lingyi)
#### Post date: [November 10, 2019, 8:39pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/8 "2019-11-10T20:39:07Z")
My understanding is that oil isn’t scarce, there’s lots of oil in the U.S., but it’s not cost effective to drill for it currently. Simple supply and demand. The places listed in the OP aren’t the only sources, but they’re historically the lowest priced. Now that it looks like for at least the near future, other countries are filling in the void, pricing their oil low to capture a part of the market. If we were to become dependent upon them, they’ll begin raising prices.
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### Author:  [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)
#### Post date: [November 10, 2019, 9:40pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/9 "2019-11-10T21:40:12Z")
> [@HMS\_Irruncible](#):
>
> If the demand forecast doesn’t change, the price will go down. Unless producers cut production.
>
> Producers don’t like to cut production because it’s hard to ramp production up and down, and they don’t want to risk losing customers permanently. But they do it if the factors seem to favor it.
Producers can also keep production going, but just store the oil rather than releasing it to market. Just hold it in big oil tanks until the price goes up again. Farmers do this with grain silos all over the country. But grain deteriorates in storage, so eventually farmers have to sell.
Oil doesn’t have nearly as much a problem. It can be stored for years. The problem with oil storage is that it tends to disappear – somebody pilfers it. (Remember the Teapot Dome scandal?)
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### Author:  [@bob\_2](https://boards.straightdope.com/u/bob_2)
#### Post date: [November 10, 2019, 10:59pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/10 "2019-11-10T22:59:33Z")
Oil is turned into petrol and diesel fuel; by-products from oil refining are used in the production of plastics and chemicals, as well as many lubricants, waxes, tars and asphalts. Nearly all pesticides and many fertilisers are made from oil or oil byproducts.
All over the world, there is pressure from governments to switch from the internal combustion engine to electric. The use of plastic is also under pressure; even fertilisers are questionable in some countries these days.
It’s hardly surprising that countries whose economies depend on oil are looking to diversify.
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### Author:  [@md2000](https://boards.straightdope.com/u/md2000)
#### Post date: [November 11, 2019, 4:48am UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/11 "2019-11-11T04:48:12Z")
> [@lingyi](#):
>
> My understanding is that oil isn’t scarce, there’s lots of oil in the U.S., but it’s not cost effective to drill for it currently. Simple supply and demand. The places listed in the OP aren’t the only sources, but they’re historically the lowest priced. Now that it looks like for at least the near future, other countries are filling in the void, pricing their oil low to capture a part of the market. If we were to become dependent upon them, they’ll begin raising prices.
My understanding, too, is that a lot of this is oil trapped in shale and freed by fracking. When oil hit $100 a barrel several years ago (2007-2008?) there was a frenzy of fracking wells in areas like western North Dakota. He new supplies came online. Then the glut and the economic slowdown hit, the price fell to $40/bbl and has not really recovered. The ND companies - many went bankrupt, but the wells were already drilled, so once the debt was shed, it was pure operating profit - they are still producing. America, the biggest emitter of carbon, is a net exporter of oil. They used to be a huge importer.
Here in Canada, we just had an election where Justin Trudeau was simultaneously criticized for not doing anything for the Alberta oil patch and tar sands, and also for spending 4 billion on a pipeline project to get their oil to world markets. (Currently held up in the courts over the need to consult native groups when building through their territory - as required by the Supreme Court, but somehow that’s also his fault.) currently only a fraction of the oil can make it to market, much of it by train tanker car. So in a few years, there will be more world supply from Canada.
So until the current glut of US fracking wells run dry, there is likely to be an oversupply of oil. Curing all the world’s ills may add to the supply , but may also add to the demand. Venezula’s supply may be dwindling, but local consumption is also low - if the economy is screwed up, nobody can afford a car and factories aren’t running.
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### Author:  [@Corry\_El](https://boards.straightdope.com/u/Corry_El)
#### Post date: [November 11, 2019, 1:27pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/12 "2019-11-11T13:27:58Z")
> [@bardos](#):
>
> After the Yemeni attack on Saudi production which reportedly cut their output by 50%… Embargo on Iranian oil. Embargo on Venezuelan oil. Libyan problems… And yet the price of oil has dropped and remains stable.
Saudi output was rapidly restored to pre-attack level, awhile ago now:
[https://www.reuters.com/article/us-saudi-security-oil-aramco/saudi-aramco-restored-oil-output-to-pre-attack-level-trading-unit-chief-idUSKBN1WF1T0](https://www.reuters.com/article/us-saudi-security-oil-aramco/saudi-aramco-restored-oil-output-to-pre-attack-level-trading-unit-chief-idUSKBN1WF1T0)
And the market gained confidence within a few days after that attack that it would be restored in plenty of time for stored oil (in SA and worldwide) to cover the gap. That’s basically the answer to the question. If somebody knocked out 50% of Saudi production and it appeared it would take a long time to restore it, the price of oil would increase dramatically.
Iranian, Venezuelan and Libyan production are all much less than SA’s. Libya’s fell years ago, and Venezuela’s gradually declining for a long time also. Even in Iran’s case it’s not an overnight shock, but increasing effectiveness, or decreasing exemptions, to (basically) US imposed embargo over many months, and which still isn’t 100% effective.
It’s true, and obvious, that more oil produced in some places, particularly the US, has made the market less sensitive to relatively small production declines in smaller well known developing country oil exporters than was the case some years ago. But again a big _and long lasting_ interruption of Saudi production would still have a big effect on price short/medium term.
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### Author:  [@Xema](https://boards.straightdope.com/u/Xema)
#### Post date: [November 13, 2019, 4:22am UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/13 "2019-11-13T04:22:02Z")
> [@md2000](#):
>
> America, the biggest emitter of carbon…
This chart says the US is #2 (16% of the world’s total). China is #1 by a long way, emitting 29% of the world’s total - 187% of what the US does.
If “America” here is North America and we add Canada and Mexico to the US total, China still easily wins with 156% of the North American total.
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### Author:  [@ralfy](https://boards.straightdope.com/u/ralfy)
#### Post date: [November 14, 2019, 3:37am UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/14 "2019-11-14T03:37:30Z")
A slowing global economy due to rising global debt, the trade war, etc.
> **[3 Charts To Know Oil's Future](https://www.forbes.com/sites/judeclemente/2019/08/23/3-charts-to-know-oils-future/)**
>
> The world's three main oil producers are also its three largest exporters. Of the three, the U.S. holds the largest potential. Although lower than normal, new global oil demand will still be over 1 million b/d again this year. Eventually, India will...
What’s notable is that the world economy is relying more on unconventional production, which has higher depletion rates and costs. That’s why the BIS estimates that oil industry debt has risen to around $2.5 trillion, and it can only be paid back steadily if oil prices increase significantly (to around $100 a barrel). To continue increasing production facing diminishing returns (higher amounts of money needed to get less new oil each time), prices have to go up even more.
Interestingly enough, back in 2006, it was estimated that by 2016, the world would be consuming around 115 Mbd due to a strong global economy, and that the oil industry could easily meet that demand.
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### Author:  [@Yakamaniac](https://boards.straightdope.com/u/Yakamaniac)
#### Post date: [November 14, 2019, 6:57am UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/15 "2019-11-14T06:57:49Z")
> [@ralfy](#):
>
> A slowing global economy due to rising global debt, the trade war, etc.
>
> [3 Charts To Know Oil's Future](https://www.forbes.com/sites/judeclemente/2019/08/23/3-charts-to-know-oils-future/)
>
> What’s notable is that the world economy is relying more on unconventional production, which has higher depletion rates and costs. That’s why the BIS estimates that oil industry debt has risen to around $2.5 trillion, and it can only be paid back steadily if oil prices increase significantly (to around $100 a barrel). To continue increasing production facing diminishing returns (higher amounts of money needed to get less new oil each time), prices have to go up even more.
>
> Interestingly enough, back in 2006, it was estimated that by 2016, the world would be consuming around 115 Mbd due to a strong global economy, and that the oil industry could easily meet that demand.
I was under the impression that, before the fracking revolution, reaching 90 million barrels a day production was questionable. The increasing price of oil in the early 2000’s was a major reason the U.S. invaded Iraq, because the embargo on their oil took the second largest producer out of the supply chain.
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### Author:  [@ralfy](https://boards.straightdope.com/u/ralfy)
#### Post date: [November 15, 2019, 9:57am UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/16 "2019-11-15T09:57:55Z")
> [@Yakamaniac](#):
>
> I was under the impression that, before the fracking revolution, reaching 90 million barrels a day production was questionable. The increasing price of oil in the early 2000’s was a major reason the U.S. invaded Iraq, because the embargo on their oil took the second largest producer out of the supply chain.
Yes, which is why they had to resort to shale. And production is slowing:
[https://www.barrons.com/articles/why-the-shale-boom-is-slowing-and-what-that-means-for-oil-prices-51572619913](https://www.barrons.com/articles/why-the-shale-boom-is-slowing-and-what-that-means-for-oil-prices-51572619913)
The prices soared, dropped, and so on after the early 2000s because of a combination of financial speculation coupled with crashes and, according to the IEA, conventional production peaking after 2005. Hence, the need to resort to shale, which unfortunately requires high oil prices. The same goes for new fields like those in Manifa.
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### Author:  [@swampspruce](https://boards.straightdope.com/u/swampspruce)
#### Post date: [November 15, 2019, 10:50pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/17 "2019-11-15T22:50:48Z")
\So what happens when Saudi Aramco goes public with their IPO? I’m assuming the royal family will retain control but what are they raising that capital for? To continue diversifying? And what happens to OPEC if the shareholders don’t like what they see?
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### Author:  [@ralfy](https://boards.straightdope.com/u/ralfy)
#### Post date: [November 16, 2019, 3:36am UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/18 "2019-11-16T03:36:43Z")
From what I remember, the water cut in KSA has been rising, which is why they need more funds to maintain production. Similar applies to fields like Manifa, which likely require prices at around $150 a barrel.
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### Author:  [@glowacks](https://boards.straightdope.com/u/glowacks)
#### Post date: [November 18, 2019, 4:45am UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/19 "2019-11-18T04:45:26Z")
> [@swampspruce](#):
>
> \So what happens when Saudi Aramco goes public with their IPO? I’m assuming the royal family will retain control but what are they raising that capital for? To continue diversifying? And what happens to OPEC if the shareholders don’t like what they see?
They will only be giving up a tiny fraction of the ownership of the company. The shareholders will have absolutely no say in the running of the business; they just get to participate in the profits.
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### Author:  [@md2000](https://boards.straightdope.com/u/md2000)
#### Post date: [November 20, 2019, 7:07pm UTC](https://boards.straightdope.com/t/how-can-there-be-a-glut-of-oil-on-the-international-markets-atm/843246/20 "2019-11-20T19:07:26Z")
Interesting NPR article:
> **[As Oil Prices Drop And Money Dries Up, Is The U.S. Shale Boom Going Bust?](https://www.npr.org/2019/11/20/780879474/as-oil-prices-drop-and-money-dries-up-is-the-u-s-shale-boom-going-bust)**
>
> The boom that helped make the U.S. the world's largest oil producer could be ending. Oil prices are down amid weak demand, and investors no longer seem willing to write the industry a blank check.
> [@](#):
>
> Today, shale accounts for about two-thirds of U.S. oil production and nearly all of the industry’s growth, but many of the companies that made that growth possible are now struggling to stay afloat.
> …
> Today, shrinking global demand for oil is driving the price down once again. What’s different this time around? Investors no longer seem willing to write the [shale oil]industry a blank check.